The Interdependence between Institutional Ownership and Information Dissemination by Data Aggregators

This study examines the interdependence between institutional ownership and the speed with which Standard & Poor's disseminates corporate accounting information. From the demand-side perspective, we find that quasi-indexers, who rely on corporate accounting information as a low-cost monitoring system, are the key driver of the institutional demand for speedy information dissemination. In addition, dissemination speed increases substantially for stocks listed in major market indices but decreases with high arbitrage risk or transaction costs. From the consequences perspective, we find that both transient investors and quasi-indexers gravitate to stocks with faster information dissemination, consistent with the latter using accounting information as a low-cost performance-monitoring mechanism, and the former being better enabled to implement their trading strategies in a richer information environment. Overall, this study provides new insights into the capital market information infrastructure by examining how information intermediaries and sophisticated investors impact each others' resource allocation decisions.